Assalam alaykum,
Literally, Jihad refers to struggling or striving... to work for something with determination. From Islamic perspective, Jihad means all endeavors designed to cultivate Islam inwardly and outwardly in a free atmosphere. It does not mean war as the Arabic word for war is HARB and the word for fighting is QITAL. Thus Jihad does not aim to force people into Islam; it only aims to REMOVE the obstacles preventing the presentation and explanation of Islam to the people.

A Muslim Ruler can declare and execute combative Jihad when:--

1. There are aggressive designs against Islam.

2. Theres are concerted efforts to eject Muslims from their land and legally acquired property and/or,

3. There are Military campaigns launched to eradicate them.

On the otherhand, Terrorism occurs when fear is cast into the heart(s) of people in order to reach political objectives.In Arabic it is called IRHAB and terrorism in that respect is divided into 4 forms, namely:-- HIRABAH, BAGHYI, FASAD and FITNAH.

HIRBAH: is to revolt against the established system and to fight against it. For those who commit this act, Islam prescribes punishment as in Ayat
33 of Surat Ma'eda of the Holy Qur'an (5:33).

BAGHYI: is a kind of terrorism which aims to spread fear and terror for the purpose of changing the system. To call a revolt terrorism, it must be directed
against a legitimate Head of State representing a legitimate State. Wher uch BAGHYI occurs, Islam commands to find peaceful solution-- see
Ayat 9 of Surat Hujrat of the Holy Quran (49:9).

FASAD: is a general term for creating mischief among people and causing disorder. Tyranny, extravagance and immorality that harm society's socio-economic
life are Fasad.

FITNAH: is the use of terror in order to force people to change their beliefs... sort of tyranny against liberty of thought or practice of religion.

In Islam, using terrorism as defined above is worse than slaugter. It is stated in the Holy Qur'an that "...FOR TURMOIL AND OPPRESSION ARE WORSE THAN SLAUGTER"(2:191).

For further reading, see Dr. Suleiman Derin's paper titled
"THE DIVINE LOVE IN ISLAMIC MYSTICISM."